Amazon is allegedly preparing to enter the crowded digital music space. Do …

Share this story

No other player in the digital music space has so far shown the ability to challenge Apple and its market-leading iPod, but Amazon will take its best shot when it launches an online music store and branded player later this year. The Wall Street Journalreports that Amazon has been in discussions with the four major music labels (Universal, Warner, EMI, and Sony BMG) about licensing the rights to their music and that the company could open its own digital download service as early as this summer.

One of the big differences between Apple's music store and the proposed Amazon offering is that Amazon plans to offer subscriptions, something that Apple has long refused to do. Though services like Napster and Rhapsody have existed for some time in the Windows world, the two companies together have just over one million users—a small fraction of the total market. Amazon, with its more than 55 million accounts, clearly sees room for growth in the subscription market. To further entice consumers, the Journal also reports that Amazon may offer its own digital music player (possibly made by Samsung) in the same way that phone companies currently provide handsets: free to customers who subscribe for a set length of time.

In addition to the possibility of a free player, Amazon hopes to set itself apart by shipping out the players pre-loaded with songs designed to appeal to that particular user. Each person would receive a player fully loaded with tunes that were chosen based on their purchase history at Amazon, though of course they could replace this music with anything they want. In addition, it appears that unlike Napster, Amazon's service will not charge more for transferring subscription music to a digital player.

Amazon is entering the digital music market incredibly late, but its massive size and solid brand name make it an instant player in the industry. It is the number one online retailer in the world and it sells 10 percent of all digital music players in the US. If the proposed music store is slick, well-promoted, and includes a free player, Apple may start to feel the heat.

If it does, Apple could make trouble for Amazon in a couple of ways. For one thing, Amazon sells a lot of iPods—and Apple may pull the plug on this arrangement if Amazon becomes a serious competitor. For another, Apple has also gone out of its way to secure commitments for a massive supply of flash memory, and Amazon could find itself hard-pressed to obtain enough flash to pump out millions of small players (though a partnership with Samsung could help them on this score, since Samsung makes its own flash).

Though Amazon has delayed its entry into the market for several years, the company clearly realizes the importance of selling digital media. Currently, they depend heavily on traditional physical media such as CDs, DVDs, and books, which together made up 70 percent of Amazon's total sales last year. As the market transitions to digital downloads, Amazon doesn't want to be left behind. The proposed music store isn't their only digital initiative, of course, but it is one piece of the puzzle. For some time, Amazon has featured a "digital locker" that contains free or bonus downloads for consumers who purchase certain products, and they are moving faster than Google to provide full-text search of copyrighted books. They are also slated to launch a new, weekly online show hosted by comedian Bill Maher later this year. Taken together, these initiatives show that the company has no plans to be left behind as the media landscape begins to shift. The question remains, though, whether an "everything and the kitchen sink" store like Amazon can compete with best-of-breed stores like iTMS.